Electronic Commerce: Applications and Issues
Electronic commerce describes
the buying, selling, transferring or exchanging of products, services or
information via computer networks, including the Internet.
E-business is a broader definition of EC, including buying and
selling of goods and services and also servicing customers, collaborating with
partners, conducting e-learning and conducting electronic transactions within
an organization.
Pure
vs. Partial EC
-The
product can be physical or digital.
-The process can be physical or digital.
-The delivery agent can be physical or digital.
Brick
and mortar organizations are purely physical organizations.
Virtual
organizations are
companies that are engaged only in EC. It also called pure play.
Click
and mortar organizations are those that conduct some e-commerce activities, yet their business is primarily done in the physical
world.
Types
of E-Commerce
Business-to-consumer
(B2C): the sellers are
organizations and the buyers are individuals.
Business-to-business
(B2B): both
the sellers and buyers are business organizations B2B represents the vast
majority of e-commerce.
Consumer-to-consumer
(C2C): an individual sells
products or services to other individuals.
Business-to-employee
(B2E): An organization uses
e-commerce internally to provide information and services to its employees.
Companies allow employees to manage their benefits, take training classes
electronically as well as buy discounted insurance, travel packages, and event
tickets.
E-Government: the use of Internet Technology in general and e-commerce
in particular to deliver information
about public services to citizens (called Government-to-citizen [G2C EC]),
business partners and suppliers (called government-to-business [G2B EC])
Mobile
Commerce (m-commerce)
refers to e-commerce that is conducted in a wireless environment.
E-Commerce
Business Models
Online
direct marketing:
manufacturers or retailers sell directly to customers.
Electronic
tendering system:
businesses (or governments) request quotes from suppliers uses B2B (or G2B) with reverse
auctions. Image above is the Hong Kong
Government’s electronic tending system homepage.
Name your
own price:
customers decide how much they want to pay.
Find the best price: customers specify a need and an intermediary
compares providers and shows the lowest price.
Affiliate
marketing:
Vendors ask partners to place logos or banners on partner’s site.If customers
click on logo, go to the vendor’s site, and buy, then the vendor pays
commission to partners.
Viral
marketing:
receivers send information about your product to their friends.
Group
purchasing:
small buyers aggregate demand to get a large volume; then the group conducts
tendering or negotiates a lower price.
Online
auctions:
companies run auctions of various types on the Internet.
Product
customization:
customers use the Internet to self-configure products or services. Sellers then
price them and fulfill them quickly.
Deep
discounters:
company offers deep price discounts.
Membership: only members can use the services provided.
Bartering
online: an
intermediary administers online exchange of surplus products,
and/or company receives “points” for its
contribution, and the points can be used
to purchase other needed items.
Major
E-Commerce Mechanisms
An auction
is a competitive process in which either a seller solicits consecutive bids
from buyers or a buyer solicits consecutive bids from sellers.
Sellers use a forward
auction as a channel to many potential buyers.
In reverse auctions, one
buyer, usually an organization, wants to buy a product or a service. The buyer posts a request for quotation (RFQ)
on its Web site or on a third-party Web site.
The RFQ contains detailed information on the desired purchase. Suppliers study the RFQ and submit bids, and
the lowest bid wins the auction.
Benefits
of E-Commerce
Benefits
to organizations
Makes national and
international markets more accessible
Lowering costs of
processing, distributing, and retrieving information
Benefits
to customers
Access a vast number of
products and services around the clock
Benefits
to Society
Ability to easily and
conveniently deliver information, services and products to people in cities,
rural areas and developing countries.
Limitations
of E-Commerce
Technological
Limitations
Lack of universally
accepted security standards
Insufficient
telecommunications bandwidth
Expensive accessibility
Non-technological
Limitations
Perception that EC is
unsecure
Unresolved legal issues
Lacks a critical mass of sellers
and buyers
Business-to-Consumer
(B2C) Electronic Commerce
An electronic
storefront is a Web site that represents a single store.
Electronic malls are
collections of individual shops under a single Internet address.
B2C
electronic commerce is
also known as e-tailing
Online
Service Industries
Online service involves
customers accessing services via the Web.
Intermediaries or
middlemen provide information and/or provide value-added services.
When the functions of
these intermediaries can be automated or eliminated, this process is called disintermediation.
Disintermediation
example : Blue
Nile is an online diamond broker that disinterrmediates the diamond supply
chain.
Online
Service Industries
Cyberbanking involves conducting banking activities from home, a
place of business or on the road instead of at a physical bank location.
Virtual
banks are dedicated only to
Internet transactions.
Issues
in E-Tailing
Channel conflict occurs
when manufacturers disintermediate their channel partners such as distributors,
retailers, dealers, and sales representatives, by selling their product directly
to consumers, usually over the Internet through electroniccommerce.
Multichanneling is a
process in which a company integrates its offline and online channels.
Order fulfillment involves
finding the product to be shipped; packaging the product; arrange for speedy
delivery to the customer; and handle the return of unwanted or defective
products.
Online
Advertising
Advertising is an attempt to disseminate information in order to
influence a
buyer-seller transaction.
Banners are simply electronic billboards.
Pop-up
ad appears in front of the
current browser window.
Pop-under
ad appears underneath the
active window.
Permission
marketing asks
consumers to give their permission to voluntarily accept online advertising and
e-mail.
Viral
marketing
refers to online “word-of-mouth” marketing.
Business-to-Business
(B2B) Electronic Commerce
In B2B e-commerce
the buyers and sellers are organizations.
the sell side marketplace,
organizations sell their products or services to other organizations electronically
from their own Web site and/or from a third-party Web site.
This is similar to the B2C
model in which the buyer comes to the seller’s site, views catalogs, and places
an order. In the B2B sell-side
marketplace, the buyers are organizations.
The buy side
marketplace is a model in which organizations buy needed products and
services from other
organizations electronically.
Exchanges have many buyers and many sellers.
Vertical
exchanges
connect buyers and sellers in a given industry.
Horizontal
exchanges
connect buyers and sellers across many industries and are used mainly for MRO
materials.
functional
exchanges
needed services such as temporary help or extra office space are traded on an
“as-needed” basis.
Electronic Payments
Electronic
payment systems
enable you to pay for goods and services electronically
Electronic
checks (e-checks) are
similar to paper checks and are used mostly in B2B.
Electronic
credit cards
allow customers to charge online payments to their credit card account.
Purchasing
cards are the B2B equivalent of
electronic credit cards and are typically used for unplanned B2B purchases.
Electronic
cash
Stored-value money cards
allow you to store a fixed amount of prepaid money and then spend it as
necessary.
Smart cards contain a chip
called a microprocessor that can store a considerable amount of information and
are multipurpose – can be used as a debit card, credit card or a stored-value
money card.
Person-to-person payments
are a form of e-cash that enables two individuals or an individual and a
business to transfer funds without using a credit card.
Ethical
and Legal Issues
Privacy: ecommerce provides opportunities for businesses and
employers to track individual activities on the WWW using cookies or special
spyware. This allows private/personal information to be tracked, compiled, and
stored as an individual profile. This profile can be used or sold to other
businesses for target marketing or by employees to aide in personnel management
decisions
Disintermediation:
middlemen or intermediaries first provide
information and second perform
value-added services such as consulting. The first function can be
fully automated, and the second can be partially automated through
e-marketplaces and portals for free thereby causing job loss among
intermediaries.
Legal
Issues Specific to E-Commerce
Fraud
on the Internet:
stocks, investments, business opportunities, auctions.
Domain
Tasting is a
practice of registrants using the five-day "grace period" at the
beginning of a domain registration to profit from pay-per-click advertising.
Cybersquatting refers to the practice of registering domain names
solely for the purpose of selling them later at a higher price.
Taxes
and other Fees when
and where (and in some cases whether) electronic sellers should pay business
license taxes, franchise fees, gross-receipts taxes, excise taxes, …etc.
Copyright
protecting intellectual property in e-commerce and
enforcing copyright laws is extremely difficult.
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